New Orleans City Council sets goals for 'disadvantaged' businesses

Wading deeply into the sometimes murky waters of efforts to steer government contracts to "disadvantaged" businesses, the New Orleans City Council voted this week to codify in law the same goals announced by Mayor Ray Nagin three years ago.

In September 2006, a year after Hurricane Katrina, Nagin issued an executive order setting "overall goals" that locally owned or controlled companies would get 50 percent of all public spending and "socially and economically disadvantaged businesses, " especially those in storm-damaged areas of the city, would get 35 percent.

Nagin's order is due to expire this fall, though he could extend it.

The council gave 7-0 approval Thursday to an ordinance embodying the same percentages as overall goals "for all public spending or private projects that utilize public funding and/or incentives."

The law says that whether individual projects will be held to the overall standard will depend "on the availability of locally owned and disadvantaged businesses in the relevant market sector."

Even though the standards now have the force of law, several speakers said the real key to their effectiveness will be how vigorously the city enforces them. Until now, some said, those efforts have often been haphazard.

The ordinance was introduced by council President Arnie Fielkow, who said small businesses "are the backbone of any strong economy, especially socially and economically disadvantaged small businesses. If this city is to reach its full potential, we have to lift up all communities, all cultures, all races."

Because past court decisions have invalidated programs that set aside specific percentages of government work or contracts for specific racial groups, the law itself makes no mention of race or any particular groups.

The law also does not define "disadvantaged, " leaving that task up to the array of local, state and federal agencies that have created programs to certify businesses as meeting certain criteria. In New Orleans, businesses owned by women or members of minority groups have typically been designated as disadvantaged.

Enforcement issue

The measure was endorsed by a broad spectrum of speakers, including leaders of the New Orleans Business Council, Urban League of Greater New Orleans and New Orleans Regional Black Chamber of Commerce.

Business Council Chairman Greg Rusovich said the law "can help raise all boats."

Judith Williams Dangerfield, executive director of the Black Economic Development Council, said Nagin's executive order held out the promise of "economic equity, " and expressed hope that the law will help make that a reality.

Even community activist Malcolm Suber, a frequent council critic, appeared to be on board, though he said the key is beefing up compliance efforts to give the goals teeth.

Fielkow said the city's compliance office has only one staff member. He said the administration and council must hire more staff or assign the task to a private contractor.

The council's Budget Committee and Economic Development Committee are expected to discuss that issue Thursday.

Budget Committee Chairwoman Cynthia Hedge-Morrell, a co-sponsor of the ordinance, said, "This measure is long overdue. Supporting our local and disadvantaged businesses will allow taxpayer dollars to remain in the community, where they can circulate and maximize the positive economic impact."

She said the law in effect tells the local business community: "Don't apply if you can't meet the requirements."

Past criticism

Critics have charged that programs to assist disadvantaged business enterprises, or DBEs, often help people who don't need help. In some cases, firms claiming to be disadvantaged have listed a woman or minority member as their owner or boss, even as white men continued to call the shots. In other cases, women and members of minority groups have been certified as disadvantaged despite having hefty incomes.

A 2003 report by the federal Department of Transportation documented abuses of such programs at the New Orleans Aviation Board, Regional Transit Authority and Orleans Levee Board.

In addition, a 2001 Times-Picayune investigation found that owners of DBEs who contributed to political campaigns were three times more likely to get government work than those who didn't.

In November 2003, Nagin announced a series of changes designed to counter such criticisms, as well as to blunt allegations by some black business owners that he had turned his back on the DBE programs of his predecessor, Marc Morial.

The new law says the goals of 50 percent local and 35 percent DBE participation "shall be applicable for all projects, programs and procurement activities that utilize any public spending, public funding, public incentives such as tax credits, or waivers in which the city forgoes its normal taxes or fees, " though not to purchases of less than $15,000 and certain other exceptions.

The law spells out in great detail how bidders for city contracts that are not DBEs or locally based must prove they have made "a good-faith effort" to reach the city's goals, such as by trying to create joint ventures with DBEs or local firms.

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Bruce Eggler can be reached at beggler@timespicayune.com or 504.826.3320.